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Indians have a special affinity for gold, not just for its beauty but also as a financial safeguard against inflation and economic uncertainty. Life is full of unexpected twists and turns, and at times, individuals need quick access to cash.
In such situations, Gold Loans come to your rescue - a secure and hassle-free way to unlock the value of our gold assets.
In this comprehensive guide, we will explore the world of Gold Loans, including what they are, how they work and the rules and regulations that govern them.
What is a Gold Loan?
A Gold Loan is a type of loan that offers financial support in exchange for preowned gold as collateral. It allows you to use your gold jewellery or ornaments to secure a loan to fund your urgent monetary requirements.
In essence, it is a simple and convenient way to unlock the value of your gold, providing you with much-needed liquidity without having to sell the precious metal. By pledging your idle gold assets as collateral, you can get the necessary funds to pay off debts, finance a big purchase, or cover unexpected expenses.
As your possessed gold secures Gold Loans in India, the interest rates are often significantly lower than what you would pay on other types of loans.
How Gold Loans Work?
You take your gold jewellery or ornaments to a lender who assesses their value based on purity, weight, and market value. Then, they offer you a loan amount based on the evaluated value.
The loan is usually offered as a percentage of the gold's value. This option allows you to support your immediate financial needs without much hassle. The best part is that you do not have to sell your gold to get the funds; you just pledge it as collateral and get your gold back once you repay the loan amount with applicable interest and charges.
Gold Loan Process in India
Checking Eligibility
The first step is to fulfill the basic eligibility requirements. You must be at least 18 years old and the rightful owner of the gold.
Gathering Required Documents:
Provide one identity proof (Aadhaar, driving licence, PAN, voter ID, passport, etc.) and one residential proof. Submit these documents to the lender to proceed with the loan application.
Choosing a Lender:
This is a crucial step in the Gold Loan process, as different lenders offer varying loan terms.
You must compare rates, terms, and conditions from multiple lenders, such as banks and NBFCs like Manappuram Finance Limited, and select a lender that best fits your needs and budget.
Visiting the Lender’s Branch:
You must visit the lender's branch in person to submit your application and pledge your gold ornaments.
Moreover, reputed lenders like Manappuram Finance Limited offer online Gold Loans, wherein you can get easy access to funds in just 3 simple steps.
Understanding the Loan Amount:
The lender will assess the value of your gold, and offer you a loan amount that will be a percentage of the gold's value, typically up to 75%.
Loan Disbursal:
Once you accept the Gold Loan offer, the lender will disburse the loan amount to you. This is a quick and straightforward process, and you will soon receive the funds you need.
Loan Repayment:
Repaying your Gold Loan is as important as getting it. You will need to choose a repayment plan that works for you.
Gold Loan Rules and Regulations
LTV Ratio:
The Loan-to-Value ratio for Gold Loans in India is capped at 75% by RBI. It means that lenders will only give you a loan for up to 75% of the current market value of your gold.
Loan Tenure:
Gold Loans typically have a short tenure, meaning they will not exceed 12 months from the date of sanction.
Gold Ownership:
To verify ownership of pledged jewellery, lenders do not necessarily require original receipts. However, for gold exceeding 20 grams, borrowers must provide documentation explaining the ownership.
Gold Valuation:
Lenders have to follow the Reserve Bank of India's (RBI) guidelines when valuing gold and disbursing loans.
Wrapping Up
Gold Loans in India have emerged as a popular financing option, offering a hassle-free way to tap the value of your gold assets.
It is always important to do your research, choose a reputable lender, such as Manappuram Finance Limited, and understand what a Gold Loan is, how it works and Gold Loan rules and regulations before you apply.
This will help you make a smart move and avoid potential pitfalls. Moreover, ensuring that your Gold Loan experience is smooth, hassle-free and beneficial to your financial well-being.